A federal plan to take a bite out of corporate crime by allowing prosecutors to suspend criminal charges against companies has potential downsides, an internal analysis says – including the risk it could fail to discourage misdeeds and erode public confidence in the legal system.

The Trudeau government has quietly tucked a proposal to amend the Criminal Code into its 582-page budget legislation. The measure would allow for the use of a tool sometimes referred to as a "deferred prosecution agreement," or DPA.

It's designed to encourage more companies to come forward to disclose corporate crimes and to identify individuals for prosecution. The primary goal of such regimes, which have been introduced in the U.S. and the U.K., is to dig up crimes that might not have otherwise come to light.

By striking one of these agreements with a prosecutor and meeting the terms of the deal, a company could avoid a criminal conviction and the resulting financial hit of being barred from bidding on lucrative public contracts for a period of 10 years.

A document prepared for the deputy minister of finance last year noted that DPAs come with "perceived advantages" and "perceived disadvantages."

"The chief argument that has been made against DPAs is that they may not deter misconduct," said a draft discussion paper on the topic prepared for Paul Rochon last August.

"Some argue that DPAs have become 'a cost of doing business,' allowing corporations to buy their way out of trouble by paying a financial penalty and passing the costs on to the consumer."

The document, obtained by The Canadian Press under the Access to Information Act, also warned about the dangers of the terms of a deferred prosecution agreement being considered too lenient, or of a DPA being applied in inappropriate cases.

"Then there is a risk of undermining public confidence in the criminal justice system," said the paper, prepared as a primer ahead of the federal government's public consultations last fall on the idea.

The document also cited several advantages, including the fact they can require a company to introduce compliance measures and independent corporate monitoring. Other benefits, the paper said, include allowing the company to focus instead on conducting business to benefit investors, employees and others.

"DPAs may be more effective than criminal prosecution in improving compliance and corporate culture."

Eligibility for one of the agreements would be decided by a prosecutor, who would negotiate the terms of the agreement and have it approved by a court.

The company, however, would still face monetary penalties as well as a blow to its reputation, since the offences and the agreements would be made public.

From the consultations last autumn, the government has since reported that the majority of participants supported a DPA regime for Canada, although some didn't think there was an obvious need for it.

"They and others were concerned that DPAs could be viewed as favouring large companies over small companies and individual offenders," said the report.

Experts like University of Toronto professor Alexander Dyck say DPAs can be effective at uncovering corporate misbehaviour and crimes that wouldn't otherwise come to light.

Lawmakers must find a way to slightly reduce punishments for companies just far enough – without eliminating them – in order to encourage firms to disclose any wrongdoing, he said.

"The benefits outweigh the costs with DPAs ... but it's important how you do it," said Dyck, a professor of finance, economic analysis and policy.

When it comes to public perception that a given DPA has been too lenient, he said it's "definitely a worry." He also recognizes there's a legitimate concern powerful corporate actors might be able to use their clout to secure a "sweetheart deal."

Dyck believes it's possible that in some cases a DPA could fail to deter corporate misconduct. However, he added the system would likely help identify many more cases that would have never been known under the existing regime.

The Trudeau government has proceeded with the measure without fanfare or even a formal announcement.

February's federal budget said the government intended to introduce legislation for a DPA in the near future, but offered few details.

Word of the proposal came as a surprise last week to lawmakers, including at least one Liberal MP, who have been studying the budget bill for the House of Commons' finance committee.

A few members of the all-party committee have said they were first made aware of the push to create DPAs only after it was brought to their attention late last Tuesday night during the testimony of a senior Justice Department official.

Committee members from each of the major political parties said they had concerns about the proposal. Liberal MP Greg Fergus said he had serious questions about it and was worried the change appeared to be designed to give those implicated in white-collar crimes "a little slap on the wrist."

Some also called for the provision to be studied by the House of Commons justice committee, which they argued has more expertise when it comes to changes to the Criminal Code.

But Daniel Lauzon, a spokesman for Finance Minister Bill Morneau, has insisted every line of the legislation refers to budget measures. He insisted it should be viewed as a whole and, therefore, all provisions should be studied as part of the entire plan.